NEW YORK (TheStreet) --Shares of Electronic Arts (EA) - Get Report are down by 4.70% to $69.01 on heavy volume in mid-morning trading on Monday, as the video game content and services provider takes a hit from GameStop's (GME) disappointing earnings results.
Electronic Arts is a Redwood City, CA-based producer of the games Madden NFL, NHL 16, FIFI 16, Star Wars: Battlefront and Need for Speed among others. GameStop is a Grapevine TX-based retailer of video games, gaming consoles and other electronic accessories for the video game playing experience.
GameStop reported earnings of 54 cents per share on revenue of $2.02 billion for the 2015 third quarter. While same store sales fell by 1.1% year over year, due to a 1.7% decline at the company's U.S. stores.
So far today, 4.51 million shares of Electronic Arts have exchanged hands as compared to the stock's 30 day moving average of 3.68 million shares.
Separately, TheStreet Ratings team rates ELECTRONIC ARTS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
We rate ELECTRONIC ARTS INC (EA) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures, notable return on equity and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- EA's debt-to-equity ratio is very low at 0.14 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.32, which illustrates the ability to avoid short-term cash problems.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Software industry and the overall market, ELECTRONIC ARTS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Compared to its closing price of one year ago, EA's share price has jumped by 63.59%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, EA should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- ELECTRONIC ARTS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ELECTRONIC ARTS INC turned its bottom line around by earning $2.68 versus -$0.03 in the prior year. This year, the market expects an improvement in earnings ($3.10 versus $2.68).
- EA, with its decline in revenue, slightly underperformed the industry average of 15.7%. Since the same quarter one year prior, revenues fell by 17.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: EA
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.